HOW TO CALCULATE YOUR NET TOTAL INCOME UNDER INCOME TAX ACT

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Adv.Shivam Kumar | Oct 20, 2021 | Views 260753

HOW TO CALCULATE YOUR NET TOTAL INCOME UNDER INCOME TAX ACT

HOW TO CALCULATE YOUR NET TOTAL INCOME UNDER THE INCOME TAX ACT

WHAT IS NET TOTAL INCOME?

Net Total Income or Total Income means an income which the taxpayer gets after calculating all the income under all five heads of income and after deducting the Deductions under Chapter VI A.

DIFFERENCE BETWEEN GROSS INCOME AND NET INCOME:

Gross Income is a wider term than Net Income, Gross Income is aggregate income from which you can arrive at Net Income after deducting the Deduction under Section 80C and 80U under Income Tax Act, 1961.

HOW TO CALCULATE YOUR NET TOTAL INCOME?

Net Total Income can be calculated by adding all the incomes of five heads and after that reducing the Deduction under Section 80C and 80U under Income Tax Act, 1961. The format of calculating all the income is as follows:

PARTICULARS AMOUNT
Rs Rs Rs
1. INCOME FROM SALARIES
Income from salary xx




xxx














xxxx
Income by way of allowances xx
Taxable value of perquisites xx
Gross salary
Less:   Deduction under Section 16 xxx
Entertainment allowance xxx
    Professional tax xxx
INCOME TAXABLE UNDER THE HEAD SALARIES
2. INCOME FROM HOUSE PROPERTY
Adjusted net annual value   xx



xxxx
Less: Deduction under section 24 xx
INCOME TAXABLE UNDER THE HEAD HOUSE PROPERTY
3. INCOME FROM BUSINESS OR PROFESSION
Net profit as per profit and loss account xx













xxxx
Add: Amounts which are debited to P&L a/c but are not allowed as a deduction under the act xx
Less: Expenditure which are not debited to P&L a/c but are allowed as a deduction under the act xx
Less: Income which are credited to P&L a/c but  are exempt under section 10 xx
Add: Income which are not credited to P&L a/c but are taxable under this head xx
PROFIT & GAINS TAXABLE UNDER THE HEAD BUSINESS & PROFESSION
4. INCOME FROM CAPITAL GAINS
Amount of capital gains xx




xxxx
Less: Amount exempt under sections 54, 54B,54D,54EC,54F, 54G, 54GA, 54GB, and 54H xx
INCOME TAXABLE UNDER THE HEAD CAPITAL GAINS
5. INCOME FROM OTHER SOURCES
Gross Income xx



xxxx
Less: Deduction under section 57 xx
INCOME TAXABLE UNDER THE HEAD OTHER SOURCES

Total [i.e., (1) +(2) +(3) +(4) +(5)]

XXX
Less: Adjustment on account of set-off and carry forward of losses XXX
Gross total income XXXX
Less: Deductions XXXX

Total Income or Net income

XXXX

WHY IT IS IMPORTANT TO CALCULATE NET TOTAL INCOME?

The total direct effects upon the tax which shall be paid by the taxpayer. Tax is to be calculated on the Total Income or Net Total Income and not to be calculated on Gross Total Income. So, the calculation of Total Income is really important as it decides the payment of tax. It shall not be either higher or lower than the real amount if in case it is then there will two consequences which is all follows:

1. In case the amount of Total Income is calculated higher than the actual amount then the taxpayer will be end paying higher amount of tax then actually what shall be paid by him. Then at the time of filing returns he can claim refund for the excess paid amount.

2. In case the amount of Total Income is calculated lower than the actual amount then the taxpayer will be end paying lower amount of tax then actually what shall be paid by him and it will be liable for penalties, notices and prosecution.

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